Shanzhai: overseas grassroots Tech Revolution

I've been meaning to write a thread on this for a LONG time -- but recently I've seen a few scattered articles that form a mosaic that I've never had time to write.

"Shanzai" is a philosophical outlook, a way of life, a cultural trend -- and the people who devote themselves to it. I'll try to provide some inside looks.

The Western press has been lumping all Shanzhai together for over a decades as "copycat barons", but "outlaws" may be a better translation. They are not barons, ruling over a fiefdom, but individuals or small groups. They're much more like Slipper Jim DiGriz, the Stainless Steel Rat, than Baron Harkonnen; more like Paul Atreides, gone to ground, than Duke Leto. They seek to live in some small way, outside the mandates of their authorities -- perhaps sometimes international law, as well, but I ask you: if you're fighting the structures of your local world, will you care about the laws outside those walls? How much do you know of Chinese law? Are you breaking it? Do you care?

The style sheets of many media outlets translate "Shanzhai" (山寨) as "mountain fortress" -- technically accurate, but woefully misleading. In the West, a "fortress" is a massive building, a tool of The Powers That Be. In China, with millennia of warlords, rebels and kings in exile, a Shanzhai is more a hideout, only a "fortification" in the sense of the natural Creswell Crags (most famously associated with Robin hood and his merry men), Hole-in-the-Wall Pass [Johnson County, WY] where dozens of famous Western gunslingers and gangs had hideouts.

In the minds of the contemporary Chinese public, "Shanzhai" is closely associated with guerrillas fighting for the little guy--most especially Song Jiang, a 12th century Chinese Robin Hood/Che Guevara immortalized in "Water Margin", one of the Four Great Classical Novels of Chinese literature. He may have led 108 bandits, but he's an "outlaw of the people" -- Robin Hood, not the 40 Thieves of Ali Baba fame.

Shanzhai are NOT shadowy criminal empires. They are guys working in garages, like Jobs & Wozniak or Hewlett & Packard. That's how they see themselves; that's how they act. They are hardware and software hackers in the white hat sense. They are DIY Makers and inventors. They are Spanky in the "Our Gang" comedies saying "I know how we can save the orphanage! Let's put on a show!. They are artists. They are often activists, political or otherwise...

...and yes, some have ambitions of becoming robber barons like Carnegie, JP Morgan, Astor, Vanderbilt, Rockefeller... nothing new there. Ambition has always been a three-edged sword. In this case, the third edge is the cultural wave which creates a type of Shanzhai I haven't discussed: megacorp Shanzhai-- the forward-looking spurts of efficient "R&D with an emphasis on D" that we sometimes see in the West, but is rarely glimpsed in our production industries, outside of self-serving PR releases.

Though the entrenched corporate interests of the West like to fan xenophobic paranoia to conflate the industrial Shanzhai of China or India with the political aspirations of their respective governments to drive us from our "rightful" place at the top of the world economy, Shanzhai is a private movement (whether personal or corporate), sometimes fighting the control or corruption of their local/national governments.

Though our industry uses almost naked bigotry to mock the idea that a right-thinking Western consumer could willingly accept the "cheap Third world products" of Shanzhai industrial giants like India's Tata, they're really quaking in their ostrich-skin boots and wasteful SUVs, and scrambling to produce something, anything that is as practical or resource efficient -- and failing: they don't want to change.

Though our media delights in horror stories of tainted imports, our own industrial history is just as bad -- and remains far from a model of probity. Frankly, Western journalism wasn't always interested in uncovering anything, and does a pretty sad job of doing so now, whatever its pretenses: a basement blogger's ill-researched screed can be parroted on the headlines of the NYT or WSJ, while obvious abuses, known well to front line reporters, may never see print.

In a very real sense, Shanzhai is the Second Coming of Yankee Ingenuity. Minus the Yankees.

Let me be clear: I don't intend to be an apologist for "rebel" acts like violations of copyright or patents (I hold a few myself), espionage or technology "theft", mislabeled or fraudulent goods -- any more than I seek to justify political oppression, centrally dictated economies, imperialism, colonialism, captive markets, indentured servitude/slavery and the many other ills of TPTB.

I just think that this is a phenomenon that we need to understand -- one we ignore or misunderstand at our own great peril, nationally, internationally and as worker bees hoping to hang onto our hives. I don't see much reportage with the kind of balanced cultural insight that is necessary for true understanding. Calling someone a 'thief' or 'infidel' politely is not a very big step forward.

For perspective, let's understand that we in the West went through precisely this same stage, and flourished as a result. Though we tend to think of Western "theft" in colonial/imperial terms, the British physically stole tea technology surreptitiously from the Chinese (and fought wars to push opium at China); Swiss smugglers stole silk technology from China under pain of death. In the Industrial Revolution, everyone stole from everyone else--and technology all over the West advanced quickly. The US stole mill designs and other industrial technologies from England, where they were explicitly protected by the Crown -- Drop by your local mill museum sometime. Most admit it.

Today, Americans see pirated versions oftheir movies, music, software, and books sold everywhere in China. A century and a half ago, Charles Dickens walked the streets of young America and fumed to see cheap pirate versions of his novels. Do I justify this? No, I just note that once WE were "China"

Indeed, unlike Europe, where royals granted open-ended charters of exclusivity, the US Constitution provides for patents/copyrights of limited term, explicitly to promote the PUBLIC advance of the Arts/Sciences (which would expire and pass into the public domain) We said: publish your inventions, creations or discoveries, and we'll grant exclusive rights for a limited term; hide them as trade secrets, and you're entirely on your own.

If you're an inventor or artist, you know all the tragic tales of the patent/copyright system in the "developed world": How Eli Whitney's cotton gin drove him to bankruptcy because no one would honor his terms (fortunately, he had one more brilliant development in him, interchangeable parts for guns; how "One-Eyed Bob" [Robert Kearns] had to spend his life fighting to defend a patent that the auto manufacturers brazenly stole from him, and still ended up broke, etc. Musicians are almost always counted as "work for hire" and not paid royalties; only the very biggest pop headliners make any money on the albums (they make it on tour) It's standard not to pay royalties to novelists for early novels, unless they negotiate something or hit big. Actors on TV classics may know that they are being shown somewhere in the world every second of every day, but their monthly royalty might not pay for a nice dinner. The 'creative accounting' is infamous.

You probably *also* know all the stories of patent abuses: the Japanese system that forced the little guy to "share" (give) his patents to the big concerns by hamstringing his own use with copycat derivatives, patent trolls who buy generic patents to create nothing but extortionate litigation, meaningless patents like "one click shopping" that were not just too obvious to be patentable but had ample prior art in the marketplace, and act solely as dissuasive legal roadblocks that must be overthrown at great expense--if anyone has deep enough pockets; "sh*t-shoveling" of worthless applications by corporations that can afford the fees, in the hopes that a few will slip by the increasingly overworked or clueless inspectors and stick.

Perhaps this topic really belongs in OT. Maybe I'll move it there, eventually--but I'd like to flesh it out and develop it, a task that will take many weeks and many posts. Feel free to debate here.

[*] I sometimes jokingly call Eli Whitney "the father of the Civil War". His cotton gin changed the world economy, and arguably led to slavery on a scale that later split the US in a Civil War. Fortunately, he had one more brilliant development in him --muskets manufactured with genuinely interchangeable parts-- which founded his great fortune, and enabled the massive arming of both sides of that Civil War.

I really regret neglecting this thread, because its subject is so deeply relevant to each of us, as private citizens navigating the US economy and job market in decades to come, and as global citizens who risk drowning in the rising tide if we bury our head in the sand.

I could devote 100s of pages to the thesis that ANY 2 decades in the TwenCen represented a cultural and economic revolution in the structure of the US and UK. It just escaped our notice like a proverbial slowly-boiled frog, further hidden by the changes in our personal lives. It's not speculation to say that the globe will change dramatically in 20 years.

I've been meaning to post the following somewhat abridged and restructured e-conversation between a number of Chinese shanzhai and American open source hackers, both individual and business (originally conducted for a TechCrunch report on rapid prototyping and micro-manufacturing). I decided not to wait until I had time to write commentary -- your observations are likely more valuable anyway. Some of the participants, like bunnie [the American engineer Andrew Huang] and seeedstudio may be familiar to most hardware hackers

If you can spare the time, I suggest reading it more than once, in different moods, some time apart, because (like most "clean" sociological observations) it can present very different insights, like a gem viewed from different angles, depending on the ideology of the reader.

The view in this ...I hesitate to call it a "transcript"... is far from comprehensive, but it's definitely a view not available to most people in the US or China.

I found it useful to not think in terms of "good or bad", intellectual property law or conventional economics, and focus on trends we can influence or adapt to vs those that flow almost inexorably from the economic, legal, and other disparities, which will likely proceed no matter what we do. Otherwise we're railing against the ocean as the tide rises.

Foxconn is probably the best known Chinese manufacturer, and the anchor of the massive industrial complex at Shenzhen, making some high end brand name products like iPads/iPhones and Alienware laptops. It recently got a huge (and unfair) publicity black eye due to reports of a suicide spree (which I will explore later, but synopsis below) which contributed to its recent removal from the Shinhua 25, the Chinese equivalent of the Dow Jones or Nikkei.

I was recently rocked to hear that Foxconn has announced plans to have ONE MILLION robots in its Shenzhen factories by 2014. That's mind-boggling. Foxconn's current 10,000 manufacturing robots already put it near or above any US city. Even if these reports were misinterpretated, and the one-million figure represents robots for ALL of Foxconn's announced factories to be built in other parts of China, it'd still be an unprecedented 3-year growth plan for any nation in world history, much less a single company.

I still can't wrap my mind around what this immense growth in *precision* manufacturing capacity might mean for the world in the coming years. Recall: in 1970, "Made in Japan" was sneered at as a proof of cheap shoddy goods, especially in cars and electronics; by 1980, it was taken as a sign of superior quality, and US domestic products are still struggling to claim that they are as good, 30 years later. A big part of that change was the automation of Japanese production, which labor unions fought strenuously here. (It was literally a matter of life or death for labor unions to preserve high-paying, relatively unskilled manual mass production -- but ultimately that can't compete on productivity/price or precision quality.

I know several people who have visited the Foxconn facility, and have read several blog tours, which I will post here, to help you understand how advanced Chinese manufacturing already is, and it has at least as much capacity in small shops and garage companies, much like the ones that made the US a sleeping industrial giant immediately before WWI and WWII.

The global impact is likely to go far beyond the obvious -- but don't think that all that capacity is destined for export. The domestic market is immense, and the national policy of spreading employment around could do a lot to make them a market that can afford luxuries. The companies that replaced Foxconn on the Shinhua 25 index are both geared to the domestic market -- arguably most of the Shinhua is now domestically focused.

(Short version: China's suicide rate is estimated to be comparable to the US rate of 11/100,000 or 110 per million. Foxconn employs 1.2 million workers, 1 million in China at the start of the "spree" and 600, of them on the Shenzhen factory floors. Were its workers not significantly *happier* than the average Chinese or American, one would expect far more than than the seventeen suicides in two years that Foxconn is blamed for. Add the fact that factory and assembly line workers, young people (the average Foxconn worker is in their early 20s) and people who have been displaced from rural to urban environment settings in search of employment all have higher than average suidcide rates, Foxconn is doing very well indeed. Far from being slavery, positions there are highly sought after, mostly by young women who work for about 3 years and save enough money to go back home and buy a farm or store that can support their entire extended family (hence the young age of its employees) Meanwhile, a lot of the "Made in USA" garments that graced Walmart shelves until recently were made in realio-trulio American sweatshops by illegal immigrant tied to their jobs by fear of the INS. Alas, those were often shut down as they grew and were unable to hide their operations.)